Assignment
Located in Southeast Asia, the Socialist Republic of Vietnam is bordered to the north by the People's Republic of China, to the west by Laos and Cambodia, and to the east and south by the South China Sea. The country is a mere 127,000 square miles but has a population of almost 86.2 million. The language is Vietnamese, and the principal religion Buddhism, although there are a number of small minorities, including Confucian, Christian (mainly Catholic), Caodist, Daoist, and Hoa Hao. In recent years, the country's economy has been up and down, but average annual per capita income still is in the hundreds of dollars as the peasants remain very poor. One of the reasons that Vietnam has lagged behind its fast-developing neighbors in Southeast Asia, such as Thailand and Malaysia, is its isolation from the industrial West, and the United States in particular, because of the Vietnam War. From the mid-1970s, the country had close relations with the U.S.S.R., but the collapse of communism there forced the still-communist Vietnamese government to work on establishing stronger economic ties with other countries. The nation recently has worked out many of its problems with China, and today, the Chinese have become a useful economic ally. And Vietnam is well on its way in establishing a vigorous trading relationship with the United States. Efforts toward this end began over a decade ago, but because of lack of information concerning the many U.S. soldiers still unaccounted for after the war, it was not until 1993 that the United States permitted U.S. companies to take part in ventures in Vietnam that were financed by international aid agencies. Then, in 1994, the U.S. trade embargo was lifted, and a growing number of American firms began doing business in Vietnam.
Caterpillar began supplying equipment for a $2 billion highway project. Mobil teamed with three Japanese partners to begin drilling offshore. Exxon, Amoco, Conoco, Unocal, and Arco negotiated production-sharing contracts with Petro Vietnam. General Electric opened a trade office and developed plans to use electric products throughout the country. AT&T began working to provide longdistance service both in and out of the country. Coca-Cola began bottling operations. Within the first 12 months, 70 U.S. companies obtained licenses to do business in Vietnam. Besides the United States, the largest investors have been Singapore, Taiwan, Japan, South Korea, and Hong Kong, which collectively have put over $22 billion into the country. Intel Corp, the world's largest chipmaker, began operation of its $1 billion assembly and testing plant in 2010. The plant is expected to manufacture US$120 million worth of products in its first year of operation, and the annual output will gradually reach $15 billion when it reaches full capacity. Over the past couple of years, Vietnamese authorities have acted swiftly to implement the structural reforms needed to modernize the national economy and to produce more competitive exports for sale in the global economy.
In July 2000 the United States and Vietnam signed a bilateral trade agreement that opens up trade and foreign investment in Vietnam and gives Vietnamese exporters access to the vast U.S. market. The treaty, which entered into force near the end of 2001, resulted in dramatic increases in foreign direct investment from the United States. As in China, many U.S. firms have found doing business in Vietnam frustrating because of the numerous and everchanging bureaucratic rules enacted by the communist government officials; but these concerns are beginning to subside with the induction of Vietnam into the World Trade Organization on January 11, 2007. After 11 years of preparation, with eight years of negotiation, Vietnam finally became the 150th member of the WTO. As a result, Vietnam is experiencing continued economic stimulus through its liberalizing reforms. Overall, this opportunity may open the market to foreign investors who were unsure of the risks involved in entering Vietnam. Vietnam's accession to the WTO provides a context of greater certainty and predictability in the business and broader economic environment. As one measure, Vietnam received more than US$85.5 billion in foreign direct investment in 2008 and 2009, exceeding the total of US$83.1 billion in the previous 20 years. U.S.-based AES Corporation, a builder of power plants, invested US$2.147 billion in Mong Duong thermal power plant project in Quang Ninh province, one of many FDI projects across Vietnam in a range of industries and sectors.
Questions
1. In what way does the political environment in Vietnam pose both an opportunity and a threat for American MNCs seeking to do business there?
2. Why are U.S. multinationals so interested in going into Vietnam? How much potential does the country offer? How might Vietnam compare to China as a place to do business?
3. Will there be any opportunities in Vietnam for hightech American firms? Why or why not?
The response should include a reference list. Double-space, using Times New Roman 12 pnt font, one-inch margins, and APA style of writing and citations.